Citigroup, Justice to detail $7B settlement

Jul. 13, 2014
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(FILES)A Citibank branch is viewed in Washington,DC in this April 13, 2012 file photo. Citigroup has settled a lawsuit by the US Federal Housing Finance Agency over the sale of home mortgage-backed securities to government-backed lenders, a court document showed May 29, 2013. According to the New York court filing, Judge Denise Cote said that both sides had reached an agreement that ends the lawsuit. The terms of the settlement were not disclosed. The FHFA sued Citigroup and 16 other financial institutions in September 2011 for violating federal securities laws in the sale of residential mortgage-backed securities to Fannie Mae and Freddie Mac. AFP PHOTO/Nicholas KAMMNICHOLAS KAMM/AFP/Getty Images ORG XMIT: - ORIG FILE ID: 520146176 / NICHOLAS KAMM AFP/Getty Images

by Kevin Johnson and Cameron Saucier, USA TODAY

by Kevin Johnson and Cameron Saucier, USA TODAY

In a settlement that will be announced Monday, Citigroup will agree to pay $7 billion to the Justice Department for misdeeds associated with the sale of mortgage-backed securities tied to the 2008 financial crisis, according to a U.S. official with knowledge of the matter and media reports.

The official was not authorized to comment publicly on the settlement and spoke on condition of anonymity.

The bank has been under investigation by federal authorities for faulty mortgage securities that fueled the housing bubble a decade ago. The settlement is far higher than the $3 billion Citigroup had offered to settle, but less than the $10 billion the government was seeking, according to a Wall Street Journal report.

The Monday announcement is set to take place on the same date that Citigroup releases its second-quarter earnings report, scheduled for 8 a.m. ET. According to Thomson Reuters, Citi is expected to post earnings per share of $1.06 vs. $1.25 the same quarter a year ago.

Last year, the U.S.'s largest bank, JPMorgan Chase, fell into a similar tangle with the Justice Department, forking out $13 billion in a settlement for selling toxic mortgage assets, Reuters reported.

According to Reuters, the Citigroup settlement puts an end to months of negotiations during which the government threatened to sue the banking giant.

Along with JPMorgan, Citigroup will be the second major U.S. bank to settle with the Justice Department in the wake of President Obama's orders to increase scrutiny of big banks after the 2008 financial crisis. In early 2012, the president ordered a task force to delve into the risky operations of many banks that sold precarious sub-prime mortgages to Americans.

Citi shares lost 2.6% last week amid a finance market in turmoil and its shares are down 10% year-to-date.